All eyes will be on Tesla’s earnings after the close today, and considering the fiasco that was last quarter’s earnings call, all ears too.

One person who will surely be following closely is prominent Tesla short David Einhorn, who told investors that the rally in Tesla shares, which he is short, turned into heavy losses at his Greenlight Capital fund and dedicated a portion of his latest letter to investors yesterday to discuss the Musk’s increasingly bizarre antics:

The most striking feature of the quarter is that Elon Musk appears erratic and desperate. During the quarter Mr. Musk:

  • Attacked an analyst for asking “boring bonehead questions” on the quarterly conference call;
  • Hung up on the head of the National Transportation Safety Board;
  • Assailed the media for the audacity to report that Tesla’s customers crash while using “autopilot”;
  • Accused an internal whistleblower of “sabotage”;
  • Appeared to paint the tape with trivial insider purchases; and
  • Went on a tweetstorm calling for “the short burn of the century.”

The market preferred this bravado much more than say, GM’s actual accomplishments. TSLA soared 29% during the quarter and was our second biggest loser.

Einhorn also famously said that he is “happy that his Model S lease ended (there were growing problems with the touchscreen and the power windows) and is excited to get the Jaguar IPACE, which has gotten excellent reviews” and continued the criticism: “The Model S residual values are falling. Meanwhile, the Model 3 initially received lukewarm reviews, and the raft of bad publicity is probably having a negative impact on the brand.”

Naturally, Musk could not let Einhorn’s jab go without response, responding early this morning on Twitter: “Tragic. Will send Einhorn a box of short shorts to comfort him through this difficult time.”

Then, in another odd comment, just hours before the Tesla earnings call, Musk followed up with another odd tweet, saying that “some of best classic @Atari games coming as Easter eggs in Tesla V9.0 release in about 4 weeks. Thanks @Atari!

In any case, with TSLA stock having recently fallen into a bear market and having lost key upside momentum, the stakes are high for everyone… but more so than ever for the shorts.

As of this moment, Tesla is the most heavily shorted U.S., and according to a Reuters analysis, short-sellers could see a nearly $850 million loss or gain, depending on the direction of the post-earnings stock move. The electric carmaker, which is burning cash at an unprecedented pace and struggling to turn a profit, is a favorite target for shorts with about 35 million shares, or roughly 28% of Tesla’s free float, currently sold short, pegging the short interest at $10.53 billion, according to S3 Partners.

Furthermore, as we noted moments ago, Q2 earnings season has been extremely volatile for reporting companies, especially for tech names, which has seen the biggest negative reaction despite what have generally been strong earnings.

And Tesla will be no exception: based on the price of weekly Tesla options contracts set to expire on Friday, traders in the options market expect the shares to swing by about 8% after the company reports results.

A move of that magnitude to the upside would mean that short-sellers would rack up about $842.6 million in on-paper losses, while they would make as much in on-paper gains if the share reaction is negative, according to S3 data.

And just like its fanatical fans, Tesla shorts have proven to be extremely tenacious: headed into the results, short-sellers, who suffered a lot of pain in the second-quarter as Tesla shares soared 29% , helped by encouraging production-related news, have shown little inclination to tweak their bets on the carmaker.

There has been virtually no net change in shares shorted in over a week,” said Ihor Dusaniwsky, head of research at S3 in New York.

“Although short-sellers’ conviction in Tesla’s longer term performance is solid with no significant short covering since the end of June when Tesla hit its year-to-date highs, I haven’t seen a rush to short more shares in anticipation of weak results,” he said.

As Reuters adds, Tesla’s post-earnings reaction will also decide whether short-sellers, who are down $170.9 million in mark-to-market losses for 2018, turn a profit or go $1 billion in the red.

Analysts expect Tesla to report revenue of $3.921 billion, up from $2.79 billion a year ago, and a loss of $2.92 per share, according to Thomson Reuters data. But all eyes will be on the cash burn, the debt and non-GAAP profitability: any upside surprises here, and the shorts will be in for a world of pain.

Finally, while there has been little movement in the number of equity shorts, with the recent launch of trade in Tesla CDS, bond traders are increasingly betting the company will default in the coming years, with the CDS surging to a contract high yesterday, implying a 43% probability of default in the next 5 years.

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